Despite wide talk of Gujarat being No 1 in things financial, top rating agency Cisil has found that the state is failing to improve upon its financial inclusion index compared to most of India. Rajiv Shah analyses the report:

A new report by the top consulting firm, Crisil, has revealed that the financial inclusion index, called Inclusix – a concept it worked out in alliance with the Ministry of Finance, Government of India, to find out how deep is financial penetration among larger sections of population – has revealed that Gujarat has failed to improve its performance over the last four years in providing the three critical parameters of banking services, viz. branch penetration, deposit penetration, and credit penetration. Titled “Crisil Inclusix: An Index to Measure India’s Progress on Financial Inclusion”, this is the second report in a year brought out by India’s authoritative consulting firm, which is supported by the well-known US rating agency, Standard & Poor.

Dated January 2014, the report – which bases the financial inclusion rankings of all the 35 Indian states and 638 districts on the basis of the data provided by the Reserve Bank of India (RBI) – has found that Gujarat has not only slipped its ranking from the 17th position in 2009 to 18th in 2011 and further to 19th in 2012. The state’s Inclusix score in 2012 was found to be 40.6 on a scale of 100 — which is 2.2 points below the national average of 42.8. India’s financial index registered an improvement by 2.7 in 2012, compared to 2011, when it was 40.1. As against this, Gujarat’s financial inclusion index improved by just 2.0.

Worse, the data suggest, of the 26 Gujarat districts analysed by the top consulting firm, only 10 districts were able to perform better than the national average (42.8). These districts are Porbandar (56.8), Vadodara, (54.1), Jamnagar (51.6), Navsari (50.4), Ahmedabad (50.3), Kutch (45.8), Anand (46.8), Rajkot (46.4), Bharuch (45.4), and Amreli (44.1). Even the state capital, Gandhinagar, being projected by the powers that be as the “role model” township for other states to follow in financial development, could score below the national average with 42.7.

Financial inclusion index on a scale of 100: Indian states

While none of Gujarat districts could make it to the top 50, backward districts of the state continued to show poor performance in financial inclusion, too, in almost the same way as other social sectors. Thus, the predominantly tribal district of Dahod scored 22.7 on a scale of 100, the worst in Gujarat, ranking No 571 among 638 Indian districts. The situation was found to be not very different for the border district of Banaskantha, scoring 23.4, and ranking No 560; Panchmahals, scoring 25.3, and ranking 532; Tapi, scoring 26.4, and ranking No 515, and so on. Each of these districts has a sizable number of tribal population.

What should be particularly disconcerting for the policy makers, who are seeking to project Gujarat as the future “financial capital” of India by introducing the Gujarat International Finance Tec-city (GIFT) next to Gandhinagar, is that several major districts, known for industrial development, performed poor compared to large parts of India. Surat, Gujarat’s second biggest city which has become an industrial and commercial hub, for instance, scored 35.0, ranking No 340, and Bhavnagar scored 32.1, ranking No 409.

Major states which performed better than Gujarat are – Kerala, with a score of 80.7, double that of Gujarat, Delhi (78.2), Andhra Pradesh (64.8), Tamil Nadu (64.8), Karnataka (61.4), Himachal Pradesh (58.4), Punjab (56.8), Uttarakhand (52.4), Haryana (49.3), Orissa (43.3) and Maharashtra (40.7). Interestingly, the study shows that out of 35 Indian states (both major and minor), as many as 22 of them showed a better improvement in their score in 2012 over 2011, as compared to that of Gujarat.

Among the major Indian states, the best improvement was registered by Delhi (14.0). This was followed by Kerala 4.3, Tamil Nadu 4.2, Karnataka 4.2, Andhra Pradesh 3.5, Karnataka 3.7, Andhra Pradesh 3.5, Maharashtra 3.2, Madhya Pradesh 3.2, Jammu & Kashmir 3.1, Odisha 2.8, West Bengal 2.5, Assam 2.2 and Rajasthan 2.1. Gujarat’s improvement was 2.0 on a scale of 100, which suggests that in financial inclusion the state machinery failed to mobilise banks to remotest corners, despite loud talk about mobilising finances for micro credit.

Crisil says, India’s score of 42.8 on a scale of 100 reflects “under-penetration of formal banking in the country.” It underlines, “Just one in two Indians have a bank savings account, and one in seven access to bank credit.” It points towards “wide regional disparities”, with south Indian states remaining “leader in financial inclusion” in “all three dimensions of financial inclusion”. These states, in fact, “strengthened” their “leadership in 2012.” What it said of India was found to be equally true for Gujarat.

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